$300m WB fund to empower local government bodies

The government yesterday signed a $300 million financing agreement with the World Bank to strengthen local governments by establishing national budget transfers for all 4,550 union parishads, the lowest tier of local government.

Built on the success of two predecessor projects, the Local Governance Support Project–3 (LGSP3) will mainstream the annual financial audits of the union parishads and will benefit over 115 million people across the country.

The project will also pilot a fiscal transfer system for 16 municipalities in eight divisions, the multilateral lender said in a statement yesterday.

The eligible municipalities will receive expanded block grants to give them access to greater resources to respond to local service delivery priorities, it said.

“Over the past decade, the World Bank has been supporting the government's vision of a stronger and more accountable local governance system,” said Qimiao Fan, World Bank country director for Bangladesh, Bhutan and Nepal.

“Started in 2006, the LGSP was the first nationwide programme to provide block grants to union parishads to spend at their own discretion.”

“With consecutive projects, fiscal transfer to union parishads for discretionary spending has increased 11-fold to Tk 2.23 million per union parishad in fiscal year 2016 from Tk 0.2 million in fiscal year 2007,”Fan said.

“LGSP3 will continue the momentum, and the enhanced discretionary resources will enable local governments respond to local needs more effectively.”

Since 2006, the World Bank has been financing the union parishad block grants. From the fourth year of the LGSP3 project, the government will fully finance the union parishad block grants out of national budgetary allocations with all the principal features.

LGSP3 will fully functionalise the web-based monitoring of union parishads functions developed under the predecessor project.

“Bangladesh has made significant progress in moving forward the decentralisation agenda as stated in the Seventh Five Year Plan,” said Kazi Azam, secretary-in-charge of the Economic Relations Division.

LGSP3 will also continue community-based initiatives and strengthen women's role in decision-making.

At least 30 percent of the grants will continue to be earmarked for schemes prioritised by women.

Azam and Fan signed the financing agreement on behalf of the government and the World Bank, at the ERD.

The zero-interest credit from the International Development Associa-tion, the World Bank's concessional arm, has a maturity of 38 years, including a 6-year grace period; and carries a service charge of 0.75 percent.